Every M&C acquisition is backed by a meaningful capital contribution by its principals. This approach ensures alignment of the firm’s interests with those of our equity partners.
A key source of M&C’s new investment opportunities is the leveraging of our deep connections in local markets, and throughout the national brokerage community. The result is a steady deal flow that allows M&C to select the very best investments in which to partner with our investors.
We specifically focus on acquiring properties in markets that have the following key characteristics:
- Strong Local Job Growth
- Strong Local Population Growth
- High Construction (Replacement) Costs
- Meaningful Barriers to Entry
- Excellent Mass Transit Systems
- High Median Incomes
- High Home Values
- High Education Levels
- Diversified Local Employment Base
- Excellent School Systems
Our Acquisition Criteria
M&C is selectively looking to add properties to their portfolio. Here is a brief outline of our acquisition criteria:
Property Size: 100-600 units
General Location: Secondary or Tertiary Markets within the United States
Immediate Location: A or B locations in urban or suburban areas
Age: 1980’s product or newer
Property Type: Value-add opportunities and/or core properties
Market Metrics: Supply constrained markets with high barriers to entry, high population growth, high job growth, and high income levels
Why Invest in Multifamily?
Inflation Hedge: Apartment rents have generally risen with inflation over the long term, thus providing built-in protection against inflationary pressure. Moreover, when financing is utilized to acquire a multifamily property, there is the added benefit of debt being repaid with inflated dollars in future periods. The combined effect provides investors with a time-proven ability to protect the purchasing power of capital, while also generating a solid rate of return.
Tax Advantages: Unlike many other investment types (stocks, mutual funds, commodities, etc.), the multifamily real estate sector possesses several unique tax advantages, including: depreciation, accelerated depreciation, and 1031 tax deferred exchanges. What this means for Millburn & Company investors is, on average, approximately 70-90% of the income generated from our investments, during the first 10 years of ownership, is offset by depreciation expense.
Steady Yield: Multifamily housing that is well-managed, conveniently located, and offers the right balance of value and amenities, is always in demand. Moreover, with a renter pool that is deeper than ever before (and an unprecedented renter focus on housing flexibility and mobility), the prospects for continued strong demand –and the resulting steady cash flow– are very solid in the multifamily sector. Finally, people need a place to live –in good economic times, and bad… During the mid-2000s downturn, the impact on multifamily real estate was not as acute as was experienced in other investment types. While many sectors suffered significant losses, high-quality multifamily properties, in strong locations, weathered the storm and continued to generate steady cash flow.
Interest Rate Hedge: Over time, if interest rates go up, so too do residential rental rates… A rise in interest rates results in an increase in the true cost of home ownership –driving many would-be homeowners back into rentals. Historically, this increase in demand for rental housing has contributed to subsequent increases in rental rates.
Attractive Financing: Given the historically strong cash flow and value preservation characteristics of the multifamily real estate sector, lending institutions generally offer far more attractive financing terms (compared with other sectors). Furthermore, due to the important role of housing to our society, the U.S. Federal Government also supports multifamily lenders (such as Fannie Mae and Freddie Mac). This government sponsorship allows Fannie and Freddie to provide superior financing terms for multifamily assets.
U.S. Homeownership Rates are Declining: According to the U.S. Census Bureau, the national homeownership rate fell to 62.9% in the second quarter of 2016 –a considerable drop from the 2004 peak of 69.2%. The result of this decline in homeownership rates has been dramatic for the rental market: For every 100 bps decline in the homeownership rate, the market sees approximately 1.1 million new renters. While The Great Recession, undoubtedly, played a significant role in this decline in homeownership, finances are not the only cause… In a recent Forbes article, it was noted that “Millennials are recognizing the many benefits of renting, including reasons that have nothing to do with their credit or the costs of owning a home. Many Millennials are choosing to rent out of preference and not necessity.”